Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Big Developments Are Supercharging iQiyi's Stock Performance

iQiyi was slow out of the gate after its IPO, but recent announcements have caused the stock to soar.

On this episode of Industry Focus: Tech, host Dylan Lewis is joined by Fool.com contributor Danny Vena to discuss ways that iQiyi (NASDAQ:IQ) is improving its competitive advantage.

A full transcript follows the video.

This video was recorded on May 11, 2018.

Dylan Lewis: This property just got spun out of Baidu (NASDAQ:BIDU) fairly recently. Shares have not been trading all that long. And in that time, we've seen the usual fluctuations that you might expect from a new issuance hitting the public markets. Some of that is due to some recent developments that are helping the company out.

Danny Vena: Personally, when I see a company IPO, I like to watch it for a little bit, see what's happening, get a feel for how the financials are doing. Everybody puts their best foot forward in their SEC filings, not that they're being dishonest, but they want you to see the metrics that put them in the best light. So, you want to watch them for a couple of quarters and see what's going on.

But even in the last week alone, there's been a couple of major announcement. There's a company in China called JD.com, which is fairly ubiquitous. It's one of the big e-commerce players in China. JD.com and iQiyi announced a partnership whereby their premium members of each company would be able to use the services of each without paying a separate fee. They put out a press release within the last couple of days that said, in the first week alone, they had generated interest from more than a million new customers.

Lewis: Yeah. Which, we talk about the difference giants in the Chinese tech space, given how competitive that space can be, I think these partnerships are valuable. This is also similar to what we've seen with Netflix (NASDAQ:NFLX) and some of the other music streaming options out there. The non-conventional, non-cable companies have done quite a bit to bundle services or offer promotional offers. You see Spotify deciding to team up with Hulu recently to make their offering a little bit more appealing. Netflix has done some work in the past with cable companies. It seems like another situation where iQiyi is borrowing from Netflix's playbook a little bit.

Vena: It does. Netflix, it's going to be hard for any company to duplicate that kind of success, but that certainly doesn't stop them from borrowing from the model. The model is wildly successful, so it makes a lot of sense that they would go that route.

Now, one other thing I wanted to mention, one of the other recent press releases came about the fact that iQiyi is the first internet streaming service in China to be certified in digital rights management. That has to do with protecting copyrights of the shows that they use. That's something we take for granted here in the United States. It's something that's been going on here for at least a decade. You remember, there was a lot of issues with pirated shows before Netflix started streaming, and the more Netflix got out there with their inexpensive monthly subscriber rates, the more pirating dropped. But pirating in China is still fairly widespread.

One of the things that iQiyi did was, they went to a company in China that's been certified by Hollywood studios, a lot of worldwide movie producers, and they got themselves certified as being a protector of digital rights. So, with this situation, that now makes them more attractive to these Hollywood studios, because they feel like, when they let iQiyi use their content, it's going to be protected, it's not going to be out there in the hands of pirates, and their investment there is protected.

Lewis: We talked about our inclination to have a couple of quarters of results and see how management handles being a publicly traded company before getting too, too interested in an IPO. These two news items alone, I think, have shares up about 20% this past week. That's kind of a testament to how much things can move around early on when you get a lot of excitement about a new business.